Crop Insurance Today May 2013 - (Page 4)

Year in Review CropInsuranceTODAY By Keith Collins and Harun Bulut, NCIS Year in Review is an annual feature of Crop Insurance TODAY ® intended to provide an overview of the performance of crop insurance during the previous crop year. Overview After a series of punishing weather events in 2011 that led to record-high indemnities, 2012 turned out to be an even more remarkable year. The 2012 crop year saw record enrollment in crop insurance followed by a historic, wide-ranging drought. Total liability, indemnities and units indemnified exceeded prior records set in 2011 and 2008. Premium was the second highest ever, while the acres insured surpassed the levels in any previous year. At the time this article was written in mid April, the Federal Crop Insurance program loss ratio (gross indemnities divided by gross premium) for the 2012 crop year was estimated at 1.53. This loss ratio is far above those observed in the prior nine years and is the highest since the devastating flood year of 1993. Indemnities under the Federal program are estimated at $17 billion, providing essential relief to producers in the hard hit areas, enabling 4 MAY2013 them to pay creditors, remain in business and rebound with what is expected to be very high acreage planted to principal crops in 2013. Illinois producers received $3.38 billion in indemnities, followed by producers in Iowa, $2.00 billion; Nebraska, $1.54 billion; Texas, $1.41 billion; and Kansas, $1.37 billion. The crop hail business program also had a record year, with the largest premium in the history of the program ($956.7 million as currently reported to NCIS) and paid out $701.4 million in losses, second highest in the history of the program after 2011. Crop insurance companies endured large underwriting losses in for the 2012 crop year, the first underwriting loss for the industry since 2002 and the sixth since the modern program began in 1981. While crop insurance program costs reached a record-high level, a substantial portion of the total cost was absorbed by the companies as their share of the underwriting losses and by the $4.1 billion of producer-paid premiums. When final results are tallied, companies expect to have a negative double-digit rate of return on a pre-tax basis, erasing underwriting gains earned in previous years. Similarly, the share of underwriting losses incurred by the Federal Crop Insurance Corporation (FCIC) on its reinsurance operations will offset a considerable portion of its underwriting gains from recent years. The drought had major impacts on crop production. After a favorable spring in most regions, lack of precipitation and high temperatures ushered in a “flash drought” over much of the Central and Southwest areas. At its peak in July, 62 percent of the continental United States was in at least moderate drought. The U.S. corn yield turned out to be 26 percent below USDA’s initial forecast and on par with the declines suffered in 1983 and 1988, making the drought the

Table of Contents for the Digital Edition of Crop Insurance Today May 2013

President's Message
2012 Year in Review
2013 Annual Convention Great Success!
Max Erickson Awarded Outstanding Service Award
Larry Heitman Pesented Leadership Award
Leadership of NCIS Regional/State Crop Insurance Committees
How Do Farmers Manage Risk When It Comes in So Many Forms?
Step 9-Monitoring and Controlling the Farm Business Q: How do I monitor progress over time?
Three Industry Stalwarts Presented Lifetime Achievement Awards
Cover Crops
Crop Insurance Plan Comparison
NCIS Retirements

Crop Insurance Today May 2013